Morrison on Metrics: Applying Metrics to Global Legal Departments

When you think about benchmark metrics for an entire global law department, you intuitively assume that its metrics differ from the metrics for any portion of the department based in a particular country or region. For this column, let's call that group of in-house lawyers a "country department," which is a part of the "global department." These days, many global departments of multinationals have multiple country departments.

A country department primarily has commercial lawyers, generalists who handle contractual matters for its country or region as well as local or smaller legal issues such as real estate, privacy and employment. At the headquarters of the global department, specialist lawyers handle companywide legal work such as securities law filings, major litigation, Board matters, corporate secretary, compliance, antitrust issues and pension matters. What difference does all this make to in their basic metrics?

To start to find out, I divided the 501 law departments in the General Counsel Metrics benchmark survey into the 37 that are country departments and approximately 400 that submitted data for the entire law department (global departments).

The median number of lawyers per billion dollars of revenue in 2009 for the country law departments was 5.6. For the others, the median was 4.6, a full lawyer per billion less. To check, I ran a different calculation. I added up all of the country lawyers and divided by the sum of their aggregate revenue: 4.9. An identical calculation for the global departments came out at 4.1, almost a full lawyer less. So, despite having more specialist lawyers on their headcount plus all country department lawyers, the global group had significantly fewer lawyers per unit of revenue than the country departments.

One reason might be that the lawyers in the regions cost less than their counterparts in the (usually) more expensive headquarters country. If a UK-based legal team has counterparts in Brazil, for example, the Brazilian lawyers may cost less and therefore there can be more of them. Another possible explanation is that global law departments are distributing a higher proportion of their lawyers in their regional and country locations. As the number of lawyers in the headquarters location shrink, the outposts (country departments) grow relatively. Another reason could be that country law departments are based where the revenue of the company has not yet caught up with the legal staffing. For example, for law departments in China of a US company the revenue from China might not yet have caught up with the in-country lawyer infrastructure necessary to generate it.

Then too local lawyers might report to and be on the budget of local general managers. GMs may be more willing to invest in legal support than the company headquarters is willing. A fourth conjecture is that headquarters departments have more paralegals and therefore fewer lawyers than country departments, where paralegals are rare or non-existent.

Each of these reasons might explain why the country departments have more lawyers per billion than global departments. Of course, the data available to me isn't pristine and without methodological problems. Still, with medians and weighted averages and a sample of more than 30 such law departments, the directional finding is likely to be correct. Although we might think that the overhead of specialist lawyers would increase lawyers per billion of revenue for global departments, for several other reasons, the local law departments might have relatively more lawyers per unit of revenue.